The 15-minute tip: A shelter for financial records

A five-step disaster recovery plan for your household

By

JenniferOpenshaw

NEW YORK (MarketWatch) -- Spring is here, and the recent Midwestern tornadoes and floods made me think about battening down my own financial hatches for a storm.

Although we haven't had Katrina-scale headlines in several years, hardly a month goes by without a calamitous loss to individual residences. And it can happen anywhere -- there were 52 disaster declarations in 32 states in 2007, according to Disaster News.

Clearly, saving life and loved ones is the top priority when disaster strikes, followed by saving property when possible. But how do you get your finances back in order when your paperwork and records are literally swept downstream or blown into the next county?

Corporate America calls it "disaster recovery." Teams of employees and outsourced partners create a plan to get a business up and running when disaster strikes. The plan covers critical assets including personnel, buildings, inventory -- and information.

What about your critical assets? Financial files? Tax records? Your home business? Do you have a plan to get your household back in business?

It takes just 15 minutes to design your own five-step disaster recovery plan.

1. Emergency fund

Preparation for any kind of financial disaster starts with some form of emergency cash fund. You will need to eat, pay bills, put gas in the car. Financial experts suggest three to six months of expenses in cash reserves. But if you lose the checkbook to that brokerage money-market fund, just how will you get that cash?

Keep some emergency reserve in a bank with a large statewide or national presence. For brokerage and other accounts, make sure you have a debit card with you at all times with a working PIN.

2. Take a photo inventory

Having pictures of your belongings streamlines the insurance claim and replacement of key personal property. A lot of folks never get to it because of the hassle of getting printed pictures. Then, what do you do with the pictures? Sound familiar?

Today's technology helps. Take digital photos. Devote a memory card to this purpose. For $10 or so you can snap away, then store the memory card in a secure place -- in your desk at work, a storage unit, or your in-law's home. The farther from "ground zero," the better.

3. Avoid the paper chase

Insurance papers, car titles, beneficiary forms, wills, trusts, birth certificates, Social Security cards -- there's a lot of paper in the average household. Sure, most are backed up somewhere, but replacement is a hassle and their absence may hamper your recovery.

Put important papers in some kind of lockbox, the more fireproof and waterproof the better, and easily accessible to grab quickly in rising waters or blowing winds. Sentry makes a series of good lockboxes; the "Safebox" and "Waterproof Security File" are fairly inexpensive.

4. Protect your data

Most households have become dependent on personal computers for managing finances. Tax returns, letters, household inventories, pictures, and investment basis information all could go "poof" in a hurry.

The availability of inexpensive flash and external disc drives make file backup easy. Make sure to back up all data files, not just "My Documents." Popular tax programs, among others, tend to put files in a different directory. Carry your flash drive with you or store in another place, such as a desk drawer at your office.

You can also try a data backup service. For about $5 a month, your home PCs can be backed up automatically and remotely. Several services are out there - Carbomite.com is one example - and a site called Onlinebackupreviews.com is a portal into the various services. You'll not only get peace of mind regarding your vital financial information, but also for personal treasures such as photos and music files.

5. Review your homeowners or renters policy

It might be time to go for a review with your property insurance agent. New programs are emerging that bring insurance coverage into the 21st century. For example, Farmers Insurance now offers a "Next Generation" homeowners policy covering identity theft, computer recovery (at home and on the road) and electronic data backup.

Before the clouds gather, take 15 minutes to put your finances on safe ground. Someday you'll be glad you did.

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